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Investing.com -- Citi upgraded Charles Schwab (NYSE:SCHW) to "Buy," citing an improving net new asset growth story as the brokerage pivots to offense following the completion of its Ameritrade client integration.
Schwab’s trading activity has been strong in the first quarter, providing a tailwind to revenue.
The firm is also making progress in reducing short-term funding needs and stabilizing cash sweep trends, which Citi sees as key to improving balance sheet flexibility and capital return potential.
The firm raised its price target to $102, reflecting a 17x multiple on its 2027 earnings estimate.
Citi highlighted Schwab’s recent net new asset momentum, noting February’s 5.6% annualized growth, and expects further acceleration in 2025.
The company has ramped up investment in brokers, branches, and marketing, while engagement from legacy Ameritrade customers has increased. Management remains confident that long-term net new asse growth can return to the 5-7% range, despite near-term market volatility.
Citi’s earnings estimates for Schwab now stand at $1.00 for Q1 2025, with full-year projections of $4.24 in 2025, $5.04 in 2026, and $6.18 in 2027. The firm sees upside in Schwab’s ability to regain a market multiple valuation as growth trends improve.
Beyond Schwab, Citi maintained a constructive view on LPL Financial (NASDAQ:LPLA), favoring its long-term growth potential through market expansion and advisor recruitment. It also sees Interactive Brokers (NASDAQ:IBKR) as well-positioned in a volatile market due to its institutional client base.
Meanwhile, Citi remains cautious on Robinhood (NASDAQ:HOOD), citing headwinds from declining crypto prices, and expects continued volatility for Raymond (NSE:RYMD) James and Stifel Financial (NYSE:SF) due to capital markets uncertainty.